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Canada got the last hurrah at the Celebration of Light Saturday evening, closing the three-night event with a winning display. Canada was declared the winner of the event, with Brazil and China finishing second and third, respectively.

Photograph by: Ian Lindsay
, Vancouver Sun files

UPDATE: The lawsuit by Timberwolf Log Trading Ltd. described in this article has now been dismissed. Mr. Justice Pearlman of the BC Supreme Court determined that Timberwolf had effectively abandoned the litigation. The judge ordered Timberwolf to pay costs to the defendants.

For the last two years, Victoria’s lawyers have battled on several fronts to forestall Timberwolf Log Trading Ltd.’s litigation over the misconduct.

But B.C. Supreme Court Justice Catherine Wedge has ruled the lawsuit, alleging misfeasance or abuse of public office and defamation, should proceed.

The small Vancouver Island log broker claims overzealous forest ministry officials — described as acting like Eliot Ness and the Untouchables — wrongly targeted the firm and far overstepped the limits of their authority.

While conducting the wrong-headed and illegal investigation, the company says a Vancouver Island compliance and enforcement officer also blackened its reputation.

“This is a David versus Goliath [case],” Timberwolf lawyer Alastair Wade said Friday.

“The government has completely interfered with the business and put it on the ropes.”

The suit — which names the ministry and enforcement officer Daniel Smallacombe — raises important and serious questions about the management of the key resource.

This case is the result of suspicions raised in 2008 that Timberwolf was under-reporting the quality and grade of logs and cheating the province on stumpage fees — the royalty paid to the Crown for the wood.

The small 12-year-old, Metro-Vancouver-based firm run by Thomas Smith and Larry Wells boasts between $5 million and $10 million in sales.

From January to May 2008, ministry investigators conducted “check scales” on seven different log booms at Timberwolf’s Menzies Bay log scale-and-sort station.

The rescaling of the booms revealed significant inaccuracies — of approximately 3,600 logs, almost 1,400 had been wrongly reported at the lower grade.

The difference between a prime log and a low-grade log is substantial: Old-growth cedar, Douglas fir and hemlock garner $30 in government royalties for every cubic metre logged, low-grade logs can go for 25 cents.

Checks at the company’s other sites produced anomalies too.

As a result, Smallacombe applied for search warrants.

All of this led in April 2010 to a $3.5-million stumpage reassessment against Timberwolf for misreporting its harvest between April 1, 2006 and Dec. 31, 2008.

Like a personal tax reassessment, the company was told to pay the money it should have paid ($3.44 million) plus a 25-per-cent penalty.

Timberwolf appealed to the minister who upheld the assessment, though the firm is still battling it.

The government did not reassess Timberwolf as if it had committed fraud, but as if a mistake was made and subject to normal dispute mechanisms, which continue to be employed to resolve the squabble.

Timberwolf complains the re-scaling of the timber was flawed and maintains it used two independent log-scaling companies.

“It’s only a broker,” Wade, the company’s lawyer, said. “The logs arrive at the scaling station from several companies, Timberwolf buys and resells them. It doesn’t do the scaling.”

Still, on April 14, 2010, Justice Wedge in a previous decision denied Timberwolf a judicial review because she thought it partly responsible for its predicament and had not exhausted the out-of-court appeals.

However, over the following few months, details of the improper investigation emerged.

The forest ministry took its allegations of fraud to the Crown in 2009 and prosecutors declined to approve charges in Sept. 2010.

Wade said Timberwolf learned people were told the company was suspected of drug-trafficking, that it was a front for organized crime and that it had links to Hells Angels. He said that was all untrue.

Timberwolf launched the suit in Jan. 2011.

It said Smallacombe abused his power by offering witnesses criminal immunity, seizing documents and records without legal authority, wrongly confiscating timber and obtaining illegal search warrants.

A month later, in Feb. 2011, Justice Miriam Gropper ruled Smallacombe was way out of line.

She said he did not have the authority or requisite evidence, nor did he provide full and frank disclosure to the justice of the peace when he obtained the four warrants in July and August 2008.

“Mr. Smallacombe is not a constable or a peace officer, and his powers are more limited than those of a game warden,” Justice Gropper noted.

Since then, the government has tried to have the Timberwolf lawsuit over abuse of power dismissed, saying it would interfere with other proceedings.

Victoria argued Smallacombe was protected by immunity or privilege as a public official doing his job.

In her most recent decision, Justice Wedge disagreed — he didn’t have any authority to obtain search warrants or initiate criminal proceedings.

Victoria tried saying the litigation should be halted because the government and the company were trying to resolve the stumpage fee dispute in other proceedings.

Justice Wedge pointed out this isn’t about the money.

“The misfeasance and defamation action will focus on the alleged unlawful conduct of Smallacombe, not on whether the outstanding amounts of stumpage were properly approved in light of the provisions of the Forest Act concerning the calculation of stumpage,” Justice Wedge ruled.

“Finally … the underlying purpose of the tort of misfeasance is to protect citizens’ reasonable expectation that public officials will not intentionally harm them through deliberate and unlawful conduct in the exercise of public functions.”